Pat Kenealy, International Data Group's kinetic chief executive officer, has a particular fondness for analogies. To him, "Google is like a newsstand on the internet," "bloggers are like pamphleteers" and business journalism is "really just another name for information arbitrage."
Because IDG publishes 300 tech magazines, newspapers and websites -- everything from Computerworld to InfoWorld to NetworkWorld to PC World -- Kenealy has a unique vantage point from which to make sense of online media.
Media Hack
So when he thinks of the future, what analogy comes to mind?
Television.
"In 1955, TV was free," Kenealy said, "and two generations later most people pay for it. There was a built-in reluctance to pay for TV until it got so much better than broadcast. That's what I think will happen with the internet."
Although there is far too much synonymous content on the web for every publisher to charge for news, if Kenealy is right, you will see what has been called "the Balkanization of online media" -- a digital world where many publishers will hide their products behind gates, far from search-engine crawlers.
Just like we got used to paying extra for cable to receive better reception in urban areas, movies on demand and far more choices and channels -- in my case, don't even think of asking me to go without HBO -- Kenealy believes we will get used to paying for internet content. After all, to draw another analogy, we got used to paying $1.50 or so at some ATMs -- and that's to withdraw our own money.
Imagine a world where you could have ready access to thousands of different types of content and purchase anything you like on the spot. Although it sounds like that old Qwest TV ad for broadband, in which a clerk at a seedy hotel promises a traveler that in his room he will have access to "every movie ever made, in every language, any time, day or night," Kenealy sees it as more akin to a newsstand.
"All those magazines are there for the browsing," he said. "You leaf through a magazine you like, you buy it for $6. The newsstand gets $2; the magazine publisher gets the rest. And if you really like it, you subscribe."
The only thing slowing down the move away from free content is the sorry state of micro-transactional software. Once all the bugs are worked out, the free internet gateway in which publications generate revenue from ads will slowly morph into another, more-lucrative business model: gated content.
It could take many forms. It could be a subscription; it could be a site that mixes gated content with free content -- like the old Salon model -- or merely a registration requirement, like NYTimes.com employs.
In fact, IDG is a living example of this. The company operates 300 websites and employs about 200 online strategies -- free content, cheap content, expensive content, content that requires an onerous registration process, and content that requires little more than an e-mail address and ZIP code. In some cases, a website may have three-quarters free content and a quarter requiring registration or a subscription. Or, it could offer a subscription for $150 a year but give it away if the reader fills out a detailed registration form.
Does it work? Sometimes. Although he wouldn't share revenue figures for IDG, Kenealy said he has watched CPMs (cost per thousand impressions, a common metric for advertising revenue) for the ComputerWorld website outstrip those for the print magazine over the past two years. In 2003, CPM for the website was $35, with the website 40 percent sold out on any given day, while the magazine reported CPM in the $80 range. Now the website's CPM is about $80, close to even with the magazine -- and it's 90 percent sold out. When it gets to 100 percent capacity, Kenealy believes it may be time to raise the gate a little.
But implementing a registration policy can be risky. It can drive away as much as 90 percent of a publication's traffic. In IDG's experience, 65 percent to 75 percent of readers tend to disappear when required to register. But required registration can also triple advertising revenue.
"You have to choose," Kenealy said. "The Wall Street Journal did it one way -- by charging for content. The New York Times did it another, by erecting a registration wall while keeping content free. And Forbes did it a third way, by growing its audience with free content."
When micro-transactions come into play, will Forbes make a killing, or will it drive away its audience? After all, a few years back Forbes Digital's management scrapped a registration requirement when it found that it repelled too many readers. Is it better to attract masses of readers or is it preferable to maintain a smaller pool of more highly qualified readers to fire ads at?
"If Forbes makes its audience too big, it stops being Forbes," Kenealy said. "If it starts doing Top 10 nude beaches (which it has), a new generation will begin to think of Forbes as entertainment. It will be changing its audience, a formula that has worked well for Forbes for generations. That's risky."
Although sites like NYTimes.com, whose publisher Arthur Sulzberger Jr. rues how he has trained a whole generation of readers to expect free content, may start charging -- it already has for some columnists' articles -- that doesn't mean we'll be forced to pay for the privilege of reading online news.
Only the stuff we really want and can't get anywhere else.
And what of blogs?
Kenealy tosses out another analogy: "Every blogger is a rock band without a record contract."
I guess he means weblogs will continue to be free.
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Adam L. Penenberg is an assistant professor at New York University and the assistant director of the business and economic reporting program in the department of journalism.
